Critical RFX Management Best Practices for IT Procurement
Procuring new technologies is essential for continued growth and efficiency for organizations across all industries. However, the IT procurement process can often become costly or result in adopting the wrong technology entirely.
A recent survey of procurement executives found the top procurement issue is reducing spend costs via acquiring cost-effective technologies. Other key issues include accelerating digital transformation, improving procurement agility, and increasing spend influence.
Executives must effectively navigate the procurement process to tackle these issues head-on. In addition, the process must be cost-effective while still discovering the right tools or platforms aligned with business goals.
IT procurement is broken down into a series of essential processes. Understanding each of these steps is vital to minimizing the cost of procurement alongside adopting the right technologies that meet your long-term business objectives.
Today, we’ll dive into the differences between three often-confused processes to help you determine how to begin procuring your next IT tool, platform, or system without consuming your budget and valuable time.
Keep reading to learn the difference between the “Request For” processes and how to overcome common challenges decision-makers often face.
RFI vs. RFQ vs. RFP: What’s the Difference?
It’s understandable to assume RFX is a specific process, but in reality, it’s an umbrella term for the entire “Request For” family. Therefore, it’s more efficient to say “RFX” when discussing procurement, then drill down into the specific processes when necessary.
What is a Request for Information (RFI)?
RFIs are sent during the early planning stages. The procurement manager will contact a variety of organizations to obtain specific information about their offering. RFIs often take the form of questionnaires with a mix of open-ended and ‘yes or no’ questions. Depending on the situation, the manager may also request access to a live demo. RFIs can also initiate dialogue with potential vendors before proceeding.
Then, the procurement manager can evaluate responses against the company’s requirements to narrow down the options and move on to the next step. Procurement managers often request more information after receiving an RFI response, and it’s wise to clarify any misunderstandings before moving to the next step.
What is a Request for Proposal (RFP)?
An RFP is an involved process that takes place when an organization knows they need something new but needs a more customized, adaptable, or overarching solution than what is readily available. RFPs often occur in the middle of the planning process before an RFQ; however, they can often be skipped entirely.
RFPs have become more commonplace in recent years as they are comprehensive processes that help organizations find the ideal solution for a given need. RFPs have existed from private organizations, like governments and municipalities, for years, but now they’re reaching into the public sector.
However, RFPs are time-consuming and expensive. An average RFP will take 200-300 full-time hours for a company to run, which generally costs $120 per hour. Therefore, to maximize RFP results, it’s advised to start small and hone in on a single provider, such as going from five companies to three, then landing on one.
Additionally, working with an experienced RFX firm like 3Quotes can minimize the time and cost involved with an RFP by cutting down on back-and-forth communication, knowing which companies to contact initially, and streamlining the overall process.
What is a Request for Quotation (RFQ)?
When a company knows exactly what they need, an RFQ will be sent to a few vendors to compare costs and reach a final decision. This step often follows an RFI and occurs near the buying cycle’s end.
An RFQ puts the onus on the provider to put together a robust and competitive quote. The procurement management will rigorously evaluate responses and service offerings before deciding on a provider. This step can often involve other decision-makers, making it even more critical for providers to create quotes with plain language and direct costs.
Key Differences Between All Three
The difference between the RFX processes can be summarized by comparing three key factors:
- Acquisition cycle: RFI takes place in the beginning, RFP is in the middle, while RFQ is right at the end before deciding on a provider. RFP can be skipped entirely for more straightforward needs.
- Cost: RFI is relatively inexpensive both for the procuring company and the provider. RFQ is more involved but is still relatively inexpensive. On the other hand, RFP is much more expensive due to its inherent complexity.
- Time: RFI and RFQ take time for the provider to send the information or quote, while the procurement management invests time analyzing responses. Comparatively, RFP consumes significantly more time for both the providers and the company.
Common RFX Challenges and How to Overcome Them
Earlier, we discussed the common procurement issues of cost-effectiveness, digital transformation enablement, procurement agility, and spend influence. These issues can be tackled by identifying common challenges that create them.
Starting by Opening a Dialogue Focusing on Your Needs
The Challenge: Initiating contact with an RFQ or even RFI can result in the vendor misunderstanding what you actually need. The rest of the transaction will be based on a faulty foundation, which may affect the service or price you receive.
The Solution: We mentioned above how an RFI also opens up a dialogue, which is often appropriate for more direct IT procurements. However, it’s often worth contacting a vendor before sending a more formal RFI to ascertain the nuances of their service. Ultimately, vendors are commodities, and you can always move on to the next option if the first one doesn’t offer what you need.
Manage Expectations for Both Parties
The Challenge: The vendor or the client fails to understand the other party, often both simultaneously. The vendor may not adequately understand what the client is seeking, or the client may misunderstand the vendor’s product. Adopting the service can have long-term consequences if these misunderstandings carry through to the end.
The Solution: Clearly communicate expectations when contacting providers. Detail exactly what you need and make sure you thoroughly understand their response. Don’t be afraid to ask clarifying questions to guarantee both parties are on the same page.
Evaluate Adaptability and Workflow Integration
The Challenge: It’s too common to see companies sign up with a provider before understanding how the given service will fit in with your overall workflow. These companies discover after signing a contract that the new service doesn’t integrate with their tech stack or lacks essential customization options.
The Solution: Directly ask vendors if they can adapt their service to fit your needs or request detailed information about integrations and customizations. You’ll avoid the costly mistake of entering a contract for something that doesn’t meet your needs.
Focus On Differentiators Between Options
The Challenge: You’ll likely have multiple options to sort through when exploring solutions for your specific need. A common issue is procurement managers focusing on pricing, which is understandable, but it can result in failing to procure the service you need.
The Solution: Focus on what a vendor actually does, how they’ll help advance core business objectives, and determine if they’ll be a good fit for your organization. Pricing is important, but don’t let a low price tag result in signing up with the wrong vendor.
Define and Prioritize Critical Needs Based on Results
The Challenge: Exploring different vendors without understanding what you need can result in focusing too much on the wrong features or platforms. A specific feature might seem appealing, but it might not align with your most essential needs. Alternatively, understand what you can do without, as pursuing perfection might lead you to miss out on an ideal option.
The Solution: Before you contact a single vendor, define the core critical needs the future vendor must meet. Then, prioritize these needs from absolutely essential to features that are only nice to have but not required. From there, you’ll be able to properly evaluate different vendors as they respond to RFIs, RPQs, and RFPs.
Understand the In-House Experts You’ll Require
The Challenge: You might sign up for the latest and greatest technology only to realize you don’t have the talent necessary to use it. You’re then left either trying to exit the contract or rushing to hire the right experts.
The Solution: Be aware of the in-house team you’ll need after signing up. Have a comprehensive understanding of the technology behind any potential vendor and what you’ll be responsible for managing. Many vendors provide an easy-to-use interface, which might be enough, while other options may require a specialized IT team.
Team Up with 3Quotes: The RFX Experts
3Quotes we run 2,500 of these per year. We know all the tips and tricks to maximize value. Let us handle/walk you through it. We’ll walk you through the RFX playbook. What it takes to get a successful RFX.
RFX is essential to IT procurement but can often become complex and time-consuming. Fortunately, you can partner with 3Quotes and benefit from our expertise. We run over 2,500 RFX processes annually; we know all the best practices to maximize your value and procure the right solution that aligns with your objectives.
Our IT procurement experts will walk you through the RFX playbook and make sure you understand what it takes to run these processes successfully. Alternatively, we can take on the task entirely, giving you a hands-off approach while still acquiring the necessary technologies.
Do you want to learn more about 3Quotes and how we’ve kept our clients happy? Discover why 3Quotes is an industry leader in IT procurement today.